• Exports fell slightly in February (-0.8% YoY; Jan: 8.7%), below expectations (KIBB: 3.0%; consensus: 2.4%)
  
  − MoM (-9.1%; Jan: 3.4%): fell sharply, partly due to seasonal factors amid factory shutdown during the Chinese NewYear holidays.

• Lower shipments to major trading partners, and weak demand for manufactured products
  
  − By destination: exports to major destinations demonstrated a mixed performance. Although growth remainedsupported by positive exports to the US (10.1%; Jan: 11.9%) and Japan (5.6%; Jan: 2.8%), it was dragged downby sustained weakness in shipments to China (-0.4%; Jan: -7.4%) and Singapore (-15.3%; Jan: -2.7%).
  
  − By sector: mainly dragged by weak export of manufacturing (-2.4%; Jan: 9.3%) and agriculture (-4.8%; Jan: 17.3%)sectors but was partially supported by a sharp rebound in mining (16.8%; Jan: -4.9%) sector.
  
  − By product: mainly due to weak exports of electrical & electronic (E&E) (-9.8%; Jan: -6.5%) products whichremained in contraction since August 2023 as well as subdued exports of petroleum products (-14.0%; Jan: 24.2%).

• Imports slowed (8.4%; Jan: 18.7%), below house projection (13.7%) but surpassing consensus (7.5%) as it was still supported by the lower base effect
  
  − Growth was also weighed down by weak re-exports (-20.2%; Jan: 4.1%), but partially mitigated by retained imports(18.8%; Jan: 24.5%) albeit slower.
  
  − By category: it was a broad-based moderation, led by capital goods (30.3%; Jan: 41.5%), followed by consumptiongoods (19.7%; Jan: 25.3%) and intermediate goods (14.3%; Jan: 21.3%).
  
  − MoM (-10.5%; Jan: 5.3%): fell sharply.

• Trade surplus expanded slightly to RM10.9b (Jan: RM10.2b), beating house estimate of RM10.3b, but lower than consensus of RM12.3b as imports outperforms exports on a MoM basis
  
  − Meanwhile, total trade moderated sharply (3.3%; Jan: 13.3%) but remained positive for the second straight month.

• 2024 export growth forecast retained at 9.4% (2023: -8.0%) on an expected turnaround in the export of E&E and a demand recovery from China particularly in the 2H24
  
  − We anticipate export growth to gradually improve in the coming months, expecting a double-digit expansion byyear-end, driven by a tech sector upturn and China's steady economic rebound underpinned by the ongoinggovernment stimulus. However, we maintain a cautious outlook due to potential disruptions from rising geopoliticaltensions that could disrupt the global supply chain and trade activities. A slower-than-expected recovery in Chinamay also cap the growth potential, particularly in the export-oriented sector.
  
  − We expect a recovery in the manufacturing export-oriented sector, alongside domestic demand growth driven by alower unemployment rate and improving household income. That said, our GDP growth forecast for 2024 remainsat 4.5% - 5.0% in 2024 (2023: 3.7%).

Source: Kenanga Research - 19 Mar 2024